Principles of Microeconomics / Unit 17 MIC 1618 short lesson, about 20 seconds
Diminishing Returns and Rising Marginal Cost
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The idea
With a fixed input each added worker eventually adds less: diminishing marginal product. Since marginal cost is the wage over marginal product, falling marginal product means rising marginal cost: one fact from two sides.
In practice
The fifth worker adds ten units for one hundred dollars: ten a unit.
Where people slip
Diminishing returns are a short-run, fixed-input fact; diseconomies of scale are a long-run one.
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